Monday, 11 September 2017

Further discount applied

Last week’s announcement of a new process for setting the discount rate applied to serious injury compensation did not come as quite the surprise that the sudden hike in March did, and the proposals seem targeted on the middle ground between insurers and those representing severely injured accident victims. ARAG’s Product Development Manager Lesley Attu takes a closer look at the announcement.

Liz Truss sent the insurance industry into a tailspin a little over six months ago, when she announced a change to the ‘discount rate” from 2.5% to -0.75%. Share prices dropped, premiums were hiked and the insurers’ PR machines went into somewhat unseemly overdrive, demanding that the ‘crazy’ decision to ensure that people with catastrophic injuries should be adequately compensated, be urgently reviewed.

It may not have come about quite as quickly as some would have liked, but the MoJ’s proposals for a new mechanism to set the discount rate seem designed to strike a compromise. If Lord Chancellor David Liddington’s prediction that the new system would currently generate a rate between 0% and 1%, then it could fall very close to the mid-point between the -0.75% that so outraged the ABI and the 2.5% that it lobbied and fought so hard and for so long to preserve.

The MoJ says it will maintain a 100% compensation rule so that claimants should receive full compensation for the loss caused by the wrongful injury, and not any more, nor any less. It has accepted that the existing legislation governing how the rate is set is unrealistic and could result in awards that significantly overcompensate claimants.

The consequence, it claims, is that the NHS and other public sector bodies can be adversely affected and insurance premiums are inflated.

The MoJ has also acknowledged that injury victims are likely to be more risk averse than ordinary, prudent investors but that “low risk” rather than “very low risk” investments would represent a fairer benchmark. 

Primary legislation is necessary and, once it is passed, the discount rate will be set by the Lord Chancellor, who will take advice from a panel of independent experts. The panel will be chaired by the Government Actuary and will include four other members who will bring experience as an actuary, an investment manager, an economist and a consumer investments expert. HM Treasury will continue to be a statutory consultee for each review, which will take place every three years.

The panel will still be able to set different rates for different types of case, but the principles behind how the rate is set will be set out in the legislation.

So far, the Lord Chancellor’s news has been received more enthusiastically by the insurance industry (and its investors) than those representing injured victims, but only time will tell if the new rate setting mechanism will prove fairer or not.

Friday, 8 September 2017

More cases are going to court

The Ministry of Justice has today published its Q2 civil justice statistics for England and Wales:

Between April to June 2017, increases can be seen across most stages of county court activity (claims, defences, trials and judgments made).

County court claims volumes are up by 40% compared to the same quarter 2016, driven by specified money claims (for example contractual disputes and debts).

In April to June 2017, the highest quarterly number of County Court claims were lodged since 2009, at 565,000. Of these, 457,000 were specified money claims (up 54% on April to June 2016).

Increases have also been seen in non-money claims for the second consecutive quarter.   For example, returns of goods claims have increased by 53% since Q3 2015.

Claims were more likely to be defended than previously. For claims that had gone to trial in April to June 2017 the figures show a 10% increase in the number of defended cases.

The average time taken from claim to hearing has increased.

Our view

The above figures corroborate the ever-increasing value of legal expenses protection and on- line legal services. ARAG policyholders can easily access online legal services to chase for outstanding debts and letters are available to download to help businesses, landlords and consumers to resolve a whole range of disputes.
Where, despite chasing for money that is owed, payment cannot be obtained; where the sum in dispute is high or where there is a dispute over goods and services our customers are insured against costs to proceed to litigation. 

Wednesday, 6 September 2017

ARAG Legal Services -

ARAG Legal Services provides access to hundreds of reactive legal documents, forms and letters that customers can easily build on line together with a law guide.

Depending on which ARAG product they have bought the customer will have access to business, consumer or landlord content on the site.  For example, businesses can download a free employment handbook and employment documentation; consumers can download a free will and landlords can download a tenancy agreement and documents to serve notice of possession.  The site gives clear guidance and prompts.

I have been looking at what respondents to our Customer Feedback survey told us about their experience of using our legal services website. Access to the website is available to most of our before-the event legal expenses insurance (LEI) policyholders. It can be useful as a retention tool by providing value to customers who would not otherwise make a claim against their ARAG policy.

Here’s a snapshot of some of the survey results which covered 1 January to the end of July this year:

  • 80% of respondents rated the ease of using the website as excellent or very good.
  • 89% of respondents rated the quality of documents they created using the service as excellent or very good.
  • 80% rated their overall satisfaction with the site as excellent or very good and 
  • 90% would recommend the legal services website to family or friends.

We are grateful for the comments customers left as we can learn from the feedback and apply it to make improvements and to provide some educational commentary to help manage users’ expectations. It’s worth telling you more about some of the feedback we have received and I’m going to split my blog into two parts to avoid it being too long. 

Users of the service who have connections to insurance were particularly positive about the site ARAG Legal Services -

For example:
“I registered as an insurance broker, as this is a free service for XXX policyholders I thought I ought to see what was in there.  I must admit I was pleasantly surprised.  H&S and risk assessment advice is most useful to my clients (Motor Trade).  I felt a bit guilty using the log in code, so rang your customer service team to explain I wanted to have a look, and they encouraged me to do so. It has already helped me win one client. Thank you.”

Our response – We would encourage all our brokers to register and explore the site. You should have been given a voucher code but if you haven’t our Sales team can help.  We can help with staff training if that’s needed too.

“I used to manage an insurance brokerage and we were frequently contacted by companies promoting inferior legal cover add on products who concentrated on profit over customer outcomes. We always remained selling ARAG's legal cover as knew the service was exemplary and cover broad. I have always renewed even after leaving that employment and now work in FCA Compliance.”

Our response – It’s great to have such complimentary feedback. Thank you. We want our products to work well for customers. We take a keen interest in the FCA’s work and have been involved in several consultations – notably the Market Study of Add-on products. We support the FCA’s remedies although the value measures will not work for LEI as they are partly based on good outcomes for consumers being evidenced by high loss ratios. The best outcomes for our customers occur when we win their claim and can recover the legal costs from the losing party. The measures also fail to take into account the additional value customers receive from using legal advice helplines and down loading legal documents.

That’s enough bragging – I mean, blogging for now. Look out for part 2 which is more of an “education piece”.

ARAG legal Services – What customers said

This is the second part of my ARAG Legal Services blog.

We are grateful to customers who find time to leave feedback on their experience of using the website.

While I always hope for and never tire of hearing positive customer feedback, we also have some constructive comments that prompt a learning opportunity.

I would like to share a couple of these with you.

One customer wrote:

“I had a query about my policy but was told you did not have access to my schedule, this was problematic as I was passed back and forth between  XXXXXX (business insurer) and yourselves and took 2 hours to find out the information I was looking for”.

Our response -  We’re sorry. This customer had LEI embedded within a business insurance policy. While the business policy would have shown insurer contact details for customer queries, we can understand how the customer became confused. The technical team that look after the site content and deal with IT related issues are not insurance professionals, so we need to consider how best to direct individuals who raise with queries about their insurance policy back to their insurer/ or to our Underwriting team if the query relates to LEI.  We will look at messaging on the contacts page of the website and on our policy wordings to help smooth out the customer journey and direct clients to the right person to help. 

“I received an e-mail saying my enquiry could not be dealt with by them and to ring the legal advice line or submit a claim. As all part of the same company, would have thought my enquiry might have been referred to the appropriate quarter enabling them to contact me with a response. Also, legal advice line number is very expensive and the alternative number provided in the message was wrong. Why can you not use an 0800 number., Not impressed!”

Our response - This customer raises a couple of points:
  •          Cost.  The legal advice line phone number is an 0330 number. It costs the same to call as a normal home or business number and calls to the number will be included in landline call packages and mobile talktime and bundles of minutes.  Our legal advisors are happy to make a call- back so that we pick up the cost of calls for customers who are concerned about call costs.
  •          Difficulty contacting us.  Our contact details (phone and e-mail) for general enquiries are shown on the legal services website and a claim form is also available to down- load. We’ve also put up some videos aimed at informing customers what to expect when they report a claim.
  •          Again, our tech team is unable to dispense legal advice or deal with insurance enquiries and we will seek to improve messaging on the legal services website and on our policy wordings to clarify this

Finally,  I think this is a back-handed compliment!

Not what I thought I was paying for although I do like the idea of the free documentation you provide and would look for this from any competitor when I move away from you.

Our response… stay with us!

Thursday, 10 August 2017

Reforming the Soft Tissue Injury (‘whiplash’) Claims Process – A point of view

From its publication in November 2016, the Government’s consultation “Reforming the Soft Tissue Injury (‘whiplash’) Claims Process” provoked much commentary from insurers and professionals who work with personal injury claims. The consultation included 31 questions and for good measure the Ministry of Justice published an accompanying Impact Assessment which raised a further 40-odd questions/calls for data and information. The closing date of 6th January drew much criticism as the pressure was on stakeholders to respond so shortly after the Christmas break.

On 17 January the Financial Secretary to the Treasury announced, in advance of the Government releasing its response to the consultation, that legislation would be started “later this month”.  This is bound to reinforce the general perception that the reforms are a “done deal” irrespective of the views of respondents. 

What’s the problem?   
Despite a reduction in motor personal injury claims in recent years the Government remains concerned about the number and cost of road traffic accident (RTA) related low value soft tissue injury (‘whiplash’) claims. The Government maintains that many whiplash claims are exaggerated or fraudulent, and wishes to reduce the impact (the Association of British Insurers says) this has on motor insurance premiums. The Government believes the amount of compensation currently paid to claimants for these claims is out of all proportion to the level of injury suffered and wishes to reduce the cost of defending the claims and sums of compensation payable to injured parties for Pain Suffering and Loss of Amenity (PSLA). The consultation seeks feedback in response to a raft of measures aimed at reducing motor insurance premium by an average of £40 a year. (it’s such a shame that almost in the same breath the Treasury imposed a further 2% increase in IPT).

The proposed reforms
The consultation questions focused on the following proposals:

·         The removal of compensation for pain, suffering and loss of amenity (PSLA) for minor whiplash
-   entirely or
-   replace by a fixed sum - £400 or £425 where psychological injury forms part of the claim.
·            Other measures
-   To introduce a tariff of payments for PSLA in more significant claims,
-   To raise the small claims court limit to £5,000 making legal costs unrecoverable,
-   To ban settlement of whiplash claims without a medical report from an accredited expert.
·       Views were also sought on related issues such as credit hire, early notification forms, rehab,   and recoverability of disbursements.

Our response
Ø  Damages

In our view it is inconceivable that injured parties in a traffic accident should lose their right to be compensated while those who suffer inconvenience with much shorter term effects (e.g. due to flight or rail delays) are considered more deserving.
With regard to the level of compensation, we cannot understand how £400 was arrived at given that the current Judicial College Guidelines (JCG) determine a median average figure of £1800.   It is our view that victim's compensation should be determined according to the degree of pain, extent of soft tissue damage and the claimant's expected recovery time – not merely the latter.  The JGC (currently edition 13) allow the courts to determine a fair level of damages, and it is unacceptable that the Government should seek to impose a fixed sum on such an arbitrary basis.

For injuries that exceed a duration of six months a tariff of damages is proposed which represent between 22% and 82% of (out of date) JCG figures. It is further suggested that there may be a 20% uplift to the proposed tariff in exceptional circumstances. In addition to seeking an explanation of why the consultation relies on out of date figures we would take issue with the figures proposed whether or not a discretionary uplift is available since the JCG already provides flexibility for courts to determine suitable levels of damages.

The consultation seeks views about whether, (if it should remain possible to seek compensation for pain, suffering and loss of amenity) the “diagnosis” or “prognosis” approach should apply. The former requires claimants to wait for six months before bringing their claim and the consultation acknowledges that the delay will act as a disincentive to the majority of claimants who have genuine injuries.  Our consultation response listed a further five disadvantageous impacts – to all parties -  of adopting such an approach.  It is incumbent upon insurers to investigate and prosecute fraudulent claims, rather than to rely on the Diagnosis approach which would be unfairly detrimental for genuine claimants.

Ø  Raising the small claims court limit

The Government asserts that the small claims track limit will be increased to £5,000.  As the limit was set over 25 years ago it is not unreasonable to consider whether it should be increased, however the certainty of this statement casts doubt on the authenticity of the consultation. The effect of inflation since the last increase produces an index-linked figure in the region of £2,000.  Increasing the small claims track limit to £5,000 will result in 93% of claims that are currently pursued with the help of a lawyer being pursued without legal representation or not at all.

In 2013 the "Transport Committee's fourth report on the cost of motor insurance: whiplash" concluded that;
·         access to justice is likely to be impaired, particularly for people who do not feel
confident to represent themselves and
·         use of the small claims procedure could prove counterproductive in efforts to discourage fraudulent and exaggerated claims and
·         that the proposed reform could create new opportunities for claims management companies.

Ø  Litigants in person

The consultation goes on to seek views on suggested improvements that could be made to provide help to litigants in person and any specific measures that might be introduced in relation to claims management companies and McKenzie friends operating in the personal injury sector.

The expectation that individuals would have the capacity, confidence or appetite to instigate claims following the trauma of an accident is unrealistic. There will clearly be an inequality of arms with genuine claimants viewing the portal (or similar digital system) as a significant barrier to bringing a claim. Vulnerable customers, those for whom English is a second language and anyone falling the wrong side of the “digital divide” will be most adversely affected and therefore an equal opportunities impact assessment must be undertaken.

We are not aware of any work having been undertaken to assess how easily individuals are able to understand the required procedures and engage with the process. The Government does not appear to have based its views on consumer evidence (such as that gathered from focus groups or consumer questionnaires) to gauge how confident potential victims feel about pursuing claims in person. More work should be carried out to properly evaluate how well individuals are able to manage the process.

In our view unqualified and unregulated McKenzie Friends and unqualified CMCs should be banned.
It is widely held that CMCs are to blame for much mischief in the market. Cold-calling activities and mis-use of personal data has created an unpleasant environment for both consumers and insurers.  The idea that the Government should encourage the use of CMCs and paid McKenzie friends is abhorrent.

Ø  Pre-medical offers

The consultation seeks views about imposing a ban on pre-medical offers and asks respondents whether this should apply to all injury claims or just RTA cases.  We support an entire ban. Pre-medical offers fuel the fraud and exaggeration that insurers complain about. Enforcement of the ban could be by the introduction of regulatory or criminal sanctions or designing a mandatory field into the claims notification form to record key information from the claimant’s medical report. Recording the source of referral of claims will shine a light on pockets of fraudulent activity by CMCs.

Ø  Credit car hire

There is a clutch of questions about credit car hire with descriptions of various “models” that describe which party provides and controls provision of a replacement vehicle. Our preference is for the “Industry Code of Conduct” option which thanks to the ABI GTA is basically what we already have. Additionally, insurers already have the opportunity to limit the extent to which their policies will pay for hire charges by drafting suitable limitations into their terms and conditions.    

Ø  Introducing time restrictions

The Government believes that “late claims” (not clear what is meant by this) are more likely to be exaggerated and seeks views on introducing a system of early notification with claimants having a limited period during which to obtain their medical examination. Besides not understanding what is meant by “late claims” we are not aware of any evidence being available to support a correlation       between the time taken to report a claim and fraud. The onus remains with the insurer to identify and challenge fraudulent claims.

Reducing the limitation period to one year for all motor personal injury claims would be an effective brake on CMCs (and paid McKenzie friends) engaging in claims fishing activities and in its 2013-14 third session report "Cost of motor insurance: whiplash" the Transport Select Committee recommend that "the Government explain the rationale for the three-year limitation period and bring forward recommendations for reducing it".

With regard to imposing a time limit for medicals, this could be positive for genuinely injured claimants. Further work should be carried out to study the behaviour of injured claimants to determine a reasonable window of opportunity following the accident during which medical help is sought before a time limit is set.

Ø  Rehabilitation

We refute suggestions that insurers are disadvantaged by mischief arising from the provision of rehabilitation services. Practitioners are bound by their own professional rules of conduct. There is already a Rehabilitation Code in force for many years agreed by both Claimant solicitors and Defendant Solicitors and insurers. This Code is working perfectly well already so there is no need to consider other options.

Ø  Impact assessment questions
Due to the very tight closing date on the consultation we were unable to provide data and responses for all of the questions and due to the length of this article we are not proposing to cover in any depth our responses here.
In summary, if the proposals are introduced, claimants will face higher BTE premiums – possibly in the region of £15 per vehicle as the costs of pursing claims will increase. This will leave many more accident victims under a reformed system uninsured for legal costs and unable to access justice.
We have challenged data supplied by the NHS Litigation Authority and main assumptions used for BTE and non-BTE claimants.
We struggle to understand how insurers will be able to discretely identify the savings from these reforms in isolation from all the other many variables that affect the pricing of premiums. We believe any savings will be “lost” in the various moving parts that make up pricing.  Secondly, we very much doubt whether Insurers will be true to their word given their poor experience of honouring past commitments. The insurance industry promised savings of £90 per motorist pre-LASPOA yet premiums have since risen by 4% despite 6% fewer claims.

These proposals will reduce the availability and increase the cost to injured victims of ATE insurance. ATE policyholders have a high proportion of low socio-economic citizens who cannot afford the alternative BTE products sold as add-ons to Motor and Household insurance products. It will be particularly damaging for non-RTA injury victims where claims are far more complex and variable.  The proposals will result in achieving the exact opposite of advancing equality of opportunity for victims who are currently vulnerable and the most disadvantaged part of society.